Friday, June 1, 2012

EBook: monopolies cross

What a tangled situation for American justice! By launching a procedure for cartel against Apple and five publishers, the Justice Department puts his finger on an insoluble problem: if we look closer, it appears that justice will have to choose sides between two dominant positions opposite, on two different levels of the market.

Between Scylla ...

Apple does come before stepping into the knot of vipers is that Amazon was the rain or shine in the world of publishing. Would that the sale of books "paper", which is the heart of original professions, Amazon has a striking force against which no chain of booksellers, as imposing as it is, can not object: when at most stores "brick and mortar" deliver books to a handful of countries, Amazon has the entire planet as a potential market.

As such, Amazon has a prime position to negotiate its purchase prices from the publishers: the company operates the law of supply and demand at full capacity, benefiting from substantial discounts on purchases wholesale, which allow discounts in turn to offer attractive prices to consumers, and rebooting the pump virtuous circle.

Publishers quickly found themselves in a difficult position, with an awkward partner that dictates their pricing policy, but against which no power-cons do not seem able to cope. In the absence of another party of equal weight, the editors found themselves bound hand and foot, while attracting the irritation of their other partners who can not enjoy the same conditions, to their own detriment.

At that Amazon has launched its full weight in the digital book, things became even more difficult. The website wanted to give every chance this emerging market by offering the lowest rates possible. The approach was altogether logical: with books dematerialized, more cost manufacturing or distribution costs to be amortized, and consumers rely on an intermediate device to read, requiring an investment itself, so it was natural to offer digital books at lower fares than their paper counterparts. This is what Amazon has done, including selling digital books at a loss and costs $ 9.99 to encourage consumers to spend at Kindle. But in doing so, Amazon has only make the situation even more uncomfortable editors: If the company of Jeff Bezos was far from alone in selling physical books, the digital book market, however, is much more pristine. Mechanically, by offering digital books cheaper than paper books, it induces an imbalance that will be in favor of Amazon, making it even more compelling.

One can also wonder how Amazon was not the idea of ​​practicing a scorched earth policy: knowing that it does not generate profits on the sale of digital books, that its margins on the Kindle must also be close to nil in relation to its price, and it also clearly has a logical platform on the Kindle Store offering its digital books on all other machines, the objective was clearly to obtain domination of this market faster, even finding a business model later.

This approach recalls the fury of startups (including e-commerce) at the millennium, just before the implosion of the bubble. This model remains to this day, he just have to see the buyback Instagram for one billion dollars by Facebook when the company did not have any source of income. But if Amazon itself began his career in an annuity, it has nevertheless achieved its first profit since 2001.

The case falls within the anecdotal, but illustrates the upheavals of this market with the largest number of bookstores per square kilometer in the U.S., the area of
​​Harvard Square in Cambridge, Massachusetts saw its bookstores close in sequence other since the advent of the Web, Curious George at Globe Corner. To resist, the Harvard Book Store library offers nothing less than the loan-to-print: the illustrious house, which is celebrating its eightieth anniversary this year, has invested in a press factory in one of four minutes five million titles available in digital form. She even delivers them in the urban community the same day by bike-bearer. Being given its practices, Amazon takes full advantage of its consistent position in the publishing world. So much so that some voices were raised against the DoJ initiative, accusing him of taking on a dominant position in front to promote a dominant position fact. In this context, therefore no surprise that publishers Apple have received as the Messiah.

And Charybdis ...

If Apple had complied with the model of bulk buying, its volume would not allow him not to adjust prices on Amazon, especially since the Kindle Store was already available on iOS while iBookStore intended to remain exclusive to him. The only way for Apple to compete on rates of sale, it was good to break the whole model.

She not only suggested the agency model to publishers, but also required to obtain a rate at least equivalent to what is offered to its competitors. This had the effect of spending the entire market agency model, despite fierce resistance from Amazon, which has relented under pressure from publishers.

In short, instead either to dealers to fix their selling prices and adjust their margins as they see fit, they have a purchase price and a fixed margin, allowing publishers to set themselves the final selling price of digital books. This was followed by an increase in the selling price of all digital books, even going so far cost more than their paper equivalent ...

And this is where justice gets involved: obviously, if the face of competition from Apple allowed Amazon to publishers to regain the advantage, it has not been to the benefit of readers who see the price books increase. The competition is dedicated to offer better for less, the anti-trust was set in motion, accusing Apple and publishers of unlawful agreement on prices, what Apple is fiercely defended.

The firm at the apple has the legitimacy of its model by emphasizing that this is already one set up for applications on the App Store. However, it fails to indicate that it is quite different to the iTunes Store, where Apple is to music what Amazon was to books, setting itself the prices and in turn being a partner leading to very cumbersome editing phonographic. The record companies have indeed had to embark on an arduous tug with iTunes to finally get to offer different pricing options instead of 99 cents previously applied to the entire catalog. In this regard, Apple will eventually be more flexible as Amazon, but it is nonetheless an indispensable partner as embarrassing: past the first record store in the world, all categories, record companies can no longer since longer afford the luxury of doing without Apple, which gives it a powerful lever to influence all negotiations to its advantage. Only redeeming its position somewhat: Apple earns a few crumbs directly with iTunes, its main objective is to provide an ecosystem to its devices to give them more interest to consumers.

Free competition is in any case a difficult problem in terms of intellectual works. Except for public domain works, they are exclusive to the publishers who have in their catalogs, and know, by nature and by their uniqueness, no comparable equivalent elsewhere. Difficult in the state of play competition on what has not, apart from the only competition for limited cultural budgets. But if Europe is also looking at the case of iBookStore, this debate is not France, which ruled in 1981 with the Lang Law on the book: by law, it is the publishers that set the price of books in the Hexagon, the dealers who had as unique flexibility that a reduction of 5% as a special promotion. As such, the model agency iBookStore is in line with French law.

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